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Last week the euro started with a loss going to as low as $1.3525 on Monday. After that it gained strength and finished the week at the highest level for the last month ($1.3702), marking a gain for the week of 0.85%. The move was partially a result of Mr. Draghi's, speech at which he said the rates could stay low but he seemed reluctant to provide more stimulus for the European economy at the moment.

The $1.37 level is crucial for the single currency - a level at which it was stopped in February, 2013. It is also just at the 76.4 Fibonacci retracement level of the rise of the U.S. dollar from $1.3831 to $1.3299 - the last significant increase of the American currency.

Technically speaking, on the daily graph it seems that the euro does not lack the strength to surpass this resistance line and start chasing the previous high of around $1.38. The longer term moving averages (shown on the graph below) are still euro positive so the main up trend of the euro seems intact.

(click to enlarge)

The Week Ahead

We have a relatively calm week regarding the economic events. The most important risk events for the week are concentrated on Thursday. Those are the ECB monthly report and the U.S. retail sales. The previous edition of the ECB monthly report gave guidance regarding the low interest levels and said those rates will stay low for an extended period of time. The current edition is expected to give the ECB's view towards the current economic situation in Europe and the world and reiterate the last month's conclusions. The U.S. retail sales would give us a hint on how strong the economic growth in the U.S. really is. Those two economic events have the potential to determine the near term direction of the EUR/USD pair.

This week's analysts optimistic expectations (57%) are higher than the last week's value. Still economic expectations are more positive than negative. This week consensuses are more optimistic for the European data (73%) than for the U.S. one (42%). The positive economic expectations for Europe increase by almost 90% while those for the U.S. decline by 8%.

Still the danger of tapering liquidity is more expected to come from the U.S. than from Europe. When that tapering happens it could give temporary short- to near-term relative strength of the USD against the euro. We should not forget however, that the stronger euro, which is a risk-on currency, is generally associated with a better development of the economies. In case that the growth continues on both sides of the ocean, in long-term the euro could appreciate even further.

The index shows the proportion the positive consensus estimates take in all the estimates we have available for the respective week. A value above 50% represents an optimistic mood in the expectations rather than pessimistic. The weekly change in index's value could be used as a tool to assess the analysts' mood. It should not be neglected however that the EUR/USD rate actually moves rather on the real data and on how that data differs from the expected one.

Investors could take advantage of their own expectations about the EUR/USD exchange rate movement in order to hedge the positions they have in other assets. For instance, American investors with investments in euro denominated assets who expect that the U.S. dollar would appreciate against the single currency, could try to decrease the currency risk by selling euros or by opening a short position in an ETF which tracks the price of the euro. CurrencyShares Euro Trust (NYSEARCA:FXE) is among the most widespread options here. It tracks only the price of the euro measured in U.S. dollars. This ETF has an expense ratio of 0.40%.

For those who prefer more diversified funds, among the options are the PowerShares DB USD Bullish ETF (NYSEARCA:UUP) and the PowerShares DB USD Bearish ETF (NYSEARCA:UDN). Both funds are U.S. dollar denominated and track the value of the USD against six other major currencies - euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. The funds' expense ratio is 0.50%.

Another option is to use the Barclays iPath EUR/USD exchange rate ETN (NYSEARCA:ERO). It is an ETN with an expense ratio of 0.40%. Its only holding is euro. Investors who believe the USD will continue to appreciate could take advantage of a short position in the ETN, and vise versa. Like all ETNs, ERO has some differences in taxation in different jurisdictions compared to an ETF. Readers are encouraged to consult a tax professional.

Those who are not feeling comfortable with or are not allowed to take short positions but still expect the euro to depreciate, could utilize a long position in the ProShares Euro Short ETF (NYSEARCA:EUFX). It tracks the inverse of the U.S. dollar price of the euro. This ETF is a commodity pool and as such has a slightly higher expense ratio (0.95%).

Monday, December 9

Event

GMT Time

EST Time

Consensus

Previous

EU Eurogroup Meeting

24h

24h

EU Germany Trade Balance (Oct.)

07:00

2:00am

€ 18.0B

€ 18.8B

EU Sentix Investor Confidence (Dec.)

09:30

4:30am

10.4

9.3

EU Germany Industrial Production (Oct.)

11:00

6:00am

1%

On Monday we have only European data which is expected to mostly have better-than-previous values. Any negative surprises would weigh on the euro.

From the U.S. side there are speeches of several of FED's members expected to happen after 17:00GMT (12am EST) which could reveal further the mood inside the FED regarding any tapering of stimulus. Hints for rather sooner than later tightening of policy would be USD supportive.

Tuesday, December 10

Event

GMT Time

EST Time

Consensus

Previous

EU EcoFin Meeting

24h

24h

USA NFIB Business Optimism Index (Nov.)

12:30

7:30am

92.3

91.6

USA Wholesale Inventories (Oct.)

15:00

10:00am

0.3%

0.4%

USA Monthly Budget Statement (Nov.)

19:00

2:00pm

$-155.0B

$-91.6B

On Tuesday we have mostly U.S. data. The analysts expectations are generally positive. Hence, any negative surprises could put some pressure on the USD.

Wednesday, December 11

Event

GMT Time

EST Time

Consensus

Previous

EU Germany CPI (Nov.)

07:00

2:00am

1.3%

1.2%

EU Germany HICP (Nov.)

07:00

2:00am

1.6%

1.2%

USA Mortgage Applications (Dec. 6)

12:00

7:00am

-12.8%

The Germany CPI and harmonized index of consumer prices (HICP) released on Wednesday are important indicators of the overall inflationary expectations for Europe. A higher-than-expected readings would mean higher inflationary expectations but those most probably would still be below the ECB's threshold of 2%. As such they are not expected to move the currency rate in such a dramatic way.

A better-than-previous reading of the U.S. mortgage applications would mean the American economy might be on the right track so this could be USD positive.

Thursday, December 12

Event

GMT Time

EST Time

Consensus

Previous

EU ECB Monthly Report

09:00

4:00

EU Industrial Production (Y-o-Y) (Oct.)

10:00

5:00am

0.8%

1.1%

USA Retail Sales (M-o-M) (Nov.)

13:30

8:30am

0.6%

0.4%

USA Jobless Claims

13:30

8:30am

321K

298K

USA Business Inventories (Oct.)

15:00

10:00am

0.5%

0.6%

Thursday is the day with the highest risk factor for the week. The ECB's monthly report would give the bank's assessment of the current economic situation and would give further insights on the nature of its monetary policy. It is expected that it will support the last month's opinion that the interest rates would stay low for an extended period of time. Any deviation from this notion could be strongly euro supportive. The expected lower-than-previous value of industrial production in Europe is in sync with the notion that there will be no surprises regarding the low interest rates in the ECB monthly report.

A negative surprise on the U.S. retail sales would put pressure on the rate of the American dollar against the euro. On the contrary, positive surprises on all of the U.S. data would be USD supportive.

Friday, December 13

Event

GMT Time

EST Time

Consensus

Previous

EU Germany Wholesale Price Index (Y-o-Y) (Nov.)

07:00

2:00am

-2.7%

EU Employment Change (Y-o-Y) (Q3)

10:00

5:00am

-1.0%

USA Producer Price Index (Y-o-Y) (Nov.)

13:30

8:30am

0.6%

0.3%

USA PPI ex. Food and Energy (Y-o-Y) (Nov.)

13:30

8:30am

1.4%

1.4%

A better-than-previous data on the Germany wholesale price index or the EU employment would be euro positive while negative surprises on the U.S. PPI would put some pressure on the USD.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: EUR/USD: The Week Ahead